Wadzinski v. Auto–Owners Ins. Co.

• Decision Date: 05 July 2012
• Docket Number: No. 2009AP2752.,2009AP2752.
• Parties: Michelle B. WADZINSKI, individually and as personal representative of the Estate of Steven M. Wadzinski, Plaintiff–Appellant, v. AUTO–OWNERS INSURANCE COMPANY, Defendant–Respondent–Petitioner.
• Court: Wisconsin Supreme Court

342 Wis.2d 311

818 N.W.2d 819

2012 WI 75

Michelle B. WADZINSKI, individually and as personal representative of the Estate of Steven M. Wadzinski, Plaintiff–Appellant,^†

v.AUTO–OWNERS INSURANCE COMPANY, Defendant–Respondent–Petitioner.

No. 2009AP2752.

Supreme Court of Wisconsin.

Argued Jan. 10, 2012.

Decided July 5, 2012.

For the defendant-respondent-petitioner there were briefs filed by Arthur E. Kurtz, Timothy M. Barber and Axley Brynelson, LLP, Madison, and oral argument by Arthur E. Kurtz.

For the plaintiff-appellant there were briefs filed by R. George Burnett and Liebmann, Conway, Olejniczak & Jerry, S.C., Green Bay, and oral argument by R. George Burnett.

PATIENCE DRAKE ROGGENSACK, J.

[342 Wis.2d 318]¶ 1 This is a review of a published decision of the court of appeals.¹ That court reversed the decision of the circuit court, ² which had granted summary judgment in favor of Auto–Owners Insurance Company. The sole question for review is whether a reasonable insured would read the Executive Umbrella insurance policy at issue here to afford $2,000,000 of uninsured motorist (UM) coverage.

¶ 2 This case arose from a fatal motorcycle accident in which Steven Wadzinski was struck and killed by an uninsured motorist. Mr. Wadzinski's wife, Michelle Wadzinski, seeks UM coverage under an umbrella insurance policy that Mr. Wadzinski's company carried on him at the time of his death. The primary dispute centers on the meaning of an endorsement to the Executive Umbrella policy, and whether that endorsement causes contextual ambiguity such that a reasonable insured would expect $2,000,000 of UM coverage under the policy. The circuit court held that the Executive Umbrella policy was clearly intended to provide only third-party liability coverage and granted summary judgment in favor of Auto–Owners. The court of appeals reversed the circuit court, concluding that the Executive Umbrella policy was contextually ambiguous, and therefore, the policy should be construed in favor of the insured to afford coverage.

¶ 3 We conclude that the Executive Umbrella policy at issue does not afford first-party UM coverage. The policy's grant of coverage unambiguously provides only excess third-party liability coverage. Further, the language and structure of the endorsement to the Executive Umbrella policy demonstrate that the endorsement reaffirms the umbrella policy's exclusion of first-party coverage. Additionally, an exception to that exclusion clarifies that the exclusion is not intended to interfere with first-party coverage in other Auto–Owners policies that are referred to in Schedule A. Accordingly, we conclude that the circuit court's summary judgment in favor of Auto–Owners was proper, and therefore, we reverse the decision of the court of appeals.

I. BACKGROUND ³

¶ 4 On August 3, 2006, Steven Wadzinski was struck and killed by an uninsured motorist while he was riding a motorcycle. At the time of the accident, Mr. Wadzinski was the Chief Executive Officer of Pecard Chemical Company, Inc., which had purchased multiple insurance policies through Auto–Owners. In the Commercial Auto Insurance policy (No. 41–321–013–00), Pecard Chemical is the named insured. That policy's grant of coverage provides $1,000,000 in third-party automobile liability coverage, as well as first-party coverage for UM and underinsured motorist (UIM) benefits. Each line of coverage (UM & UIM) affords $150,000 per person or $300,000 per occurrence of first-party coverage. The total premium for the Commercial Auto policy is $1,371.84. ⁴ Pecard Chemical is also the named insured under the Commercial Umbrella policy (No. 96–886–558–00), which policy's grant of coverage provides up to $5,000,000 in third-party liability coverage. The annual premium for the Commercial Umbrella policy is $2,923. The Commercial Umbrella policy specifically excludes UM and UIM coverage.⁵

¶ 5 In a third Auto–Owners policy, the Executive Umbrella policy, Mr. Wadzinski is the named insured. The Executive Umbrella policy shares a policy number with the Commercial Umbrella policy under which Pecard Chemical is the named insured. The Executive Umbrella policy, whose language is now at issue, provides $2,000,000 in excess coverage over the underlying policies that are listed in Schedule A. Those underlying policies are a Comprehensive Personal Liability policy (not at issue here) and an Automobile Liability policy with a $500,000 minimum coverage requirement. The annual premium for the Executive Umbrella policy is $234.

[342 Wis.2d 321]¶ 6 After Mr. Wadzinski's death, Auto–Owners paid Wadzinski's estate the limits of the Commercial Auto policy's UM coverage, $150,000. When Auto–Owners refused the estate's claim for payment of $2,000,000 of UM benefits under the Executive Umbrella policy, Mrs. Wadzinski, individually and as the representative of Mr. Wadzinski's estate, brought suit against Auto–Owners.

¶ 7 The provision in the Executive Umbrella policy at the center of the parties' dispute is an endorsement captioned “Exclusion of Personal Injury to Insureds Following Form.” That endorsement provides as follows: “We do not cover personal injury to you or a relative. We will cover such injury to the extent that insurance is provided by an underlying policy listed in Schedule A.” The policies listed in Schedule A were issued by Auto–Owners.

¶ 8 The parties brought competing motions for summary judgment on the issue of UM coverage under the Executive Umbrella policy. Auto–Owners asserted that the Executive Umbrella policy “clearly and unambiguously excludes an additional claim for UM coverage.” Wadzinski argued that the Executive Umbrella policy, when read as a whole, is ambiguous and that a reasonable insured would expect $2,000,000 in UM coverage under the policy. After briefing and argument, the Brown County Circuit Court granted summary judgment in favor of Auto–Owners. The court concluded that it was “[o]bviously[,] blatantly, unambiguously clear” that the Executive Umbrella policy provided only third-party liability coverage and no first-party coverage. Wadzinski appealed.

¶ 9 The court of appeals reversed the circuit court's grant of summary judgment. Wadzinski v. Auto–Owners Ins. Co., 2011 WI App 47, ¶ 1, 332 Wis.2d 379, 797 N.W.2d 910. The court of appeals concluded that the Executive Umbrella policy was contextually ambiguous, and therefore, an insured reading the policy and endorsements could reasonably expect the policy to afford $2,000,000 of first-party UM coverage. Auto–Owners petitioned this court for review, which we granted.

II. DISCUSSION

A. Standard of Review

¶ 10 The circuit court interpreted the insurance contract and granted Auto–Owners' motion for summary judgment on the question of whether the Executive Umbrella policy affords coverage for losses caused by uninsured motorists. Insurance contract interpretation is a question of law that we review independently of decisions of the circuit court and court of appeals, while benefitting from their analyses. Acuity v. Bagadia, 2008 WI 62, ¶ 12, 310 Wis.2d 197, 750 N.W.2d 817. Whether an insurance contract is ambiguous is also a question of law for our independent determination. Id., ¶ 13. When reviewing summary judgment, we apply the same methodology as the circuit court to determine whether, under Wis. Stat. § 802.08(2) (2009–10),⁶ the moving party is entitled to judgment as a matter of law. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816 (1987).

B. Insurance Policy Interpretation

¶ 11 An insurance policy is a contract, and a court's primary purpose in interpreting a contract for insurance is to give effect to the intentions of the parties. Folkman v. Quamme, 2003 WI 116, ¶ 12, 264 Wis.2d 617, 665 N.W.2d 857. The parties' intentions are presumed to be expressed in the language of the policy. Id., ¶¶ 12–13. We construe the policy language from the perspective of a reasonable insured, giving the words used their common and ordinary meaning. Stubbe v. Guidant Mut. Ins. Co., 2002 WI App 203, ¶ 8, 257 Wis.2d 401, 651 N.W.2d 318. On the other hand, where the policy language at issue “is susceptible to more than one reasonable construction,” it is ambiguous. Id. Where ambiguity exists in a grant of coverage, we will construe the policy against the drafter, and in favor of the reasonable expectations of the insured. Folkman, 264 Wis.2d 617, ¶¶ 16–17, 665 N.W.2d 857.

¶ 12 However, the principle that ambiguities will be construed in favor of the insured is not without limits. Primarily, this rule of construction applies to determine the breadth of initial grants of coverage. Accordingly, ambiguities in a grant of coverage are construed broadly in favor of affording coverage. Acuity, 310 Wis.2d 197, ¶ 13, 750 N.W.2d 817. This benefits the insured. Ambiguities in exclusions to a grant of coverage are construed narrowly, thereby limiting the exclusion. Frost v. Whitbeck, 2001 WI App 289, ¶ 9, 249 Wis.2d 206, 638 N.W.2d 325. This also favors the insured. However, a reasonable insured is presumed to understand that an exclusion in an insurance policy limits, rather than confers, coverage. Bulen v. W. Bend Mut. Ins. Co., 125 Wis.2d 259, 263, 371 N.W.2d 392 (Ct.App.1985). Stated otherwise, clauses of exclusion subtract from coverage, rather than add to coverage. Id.

[342 Wis.2d 324] ¶ 13 Further, where an insurance policy's initial grant of a type of coverage is clear, a court will not interpret an ambiguity in an exception to an exclusion to operate as a grant of an additional type of coverage. See Jaderborg v. Am. Family Mut. Ins. Co., 2000 WI App 246, ¶ 17, 239 Wis.2d 533, 620 N.W.2d 468 (“Coverage cannot be established by an exception to an exclusion.”) (citing Arnold P. Anderson, Wisconsin Insurance Law § 1.9B (4th ed.1998)). An exclusion must be read in conjunction with the policy's initial grant of coverage because it is on that initial grant of coverage that the exclusion operates. An “ ‘exception to...